Funding Rates Explained: The Hidden Cost of Holding a Perpetual Futures Position

Perpetual futures, the most common type of futures contract on Bitval and most crypto exchanges, never expire. That raises a question a traditional futures contract doesn't have to answer: what keeps its price anchored to the actual asset over time? The answer is the funding rate.

Why Perpetuals Need Funding at All

A traditional futures contract has an expiration date, at which point its price converges with the underlying asset by design. A perpetual contract has no expiration, so without some mechanism, its price could drift indefinitely from the actual spot price. Funding rates solve this: a periodic payment exchanged directly between traders holding long and short positions, sized to pull the perpetual's price back toward the spot price.

How the Payment Works

When the perpetual contract trades above the spot price, longs pay shorts. When it trades below spot, shorts pay longs. The payment happens directly between traders, not to or from the exchange, at fixed intervals, commonly every eight hours on Bitval and most platforms. If you hold a position through a funding interval, the payment is automatically applied to your account based on your position size and the current funding rate.

What Determines the Rate

The funding rate is calculated from the gap between the perpetual contract's price and the spot price, plus an interest rate component. A larger gap produces a larger funding rate, since the payment needs to be big enough to incentivize traders to close the gap. When far more traders are long than short, the perpetual price tends to trade above spot, pushing the funding rate positive and making longs pay shorts, and vice versa.

Why This Matters If You Hold Positions

Funding payments are easy to overlook because they're not a trading fee in the traditional sense, but they add up over time for any position held across multiple funding intervals. A position held for days or weeks during a period of consistently positive funding can accumulate a meaningful cost purely from funding payments, separate from the maker or taker fees charged on the trade itself.

Where to Check This

Bitval displays the current and historical funding rate directly on the futures trading interface for each perpetual market, so you can see what a position has cost, or earned, in funding before deciding whether to hold it further. Bitval's futures fees are 0.03% maker / 0.06% taker, separate from any funding paid or received. If you want to see live funding rates, you can check Bitval's futures markets here.

This article is for informational purposes only and does not constitute financial or investment advice. Futures and leverage trading carry substantial risk.